Amazon introduced its Cloud Locker and Amazon Cloud Player and Google has introduced Google Music (beta). Both companies are offering cloud based storage for music. No big deal, right? Wrong. Music labels are concerned because Amazon and Google haven’t worked out a business relationship wherein the music labels and the artists get a piece of the pie every time a song is access on the cloud.

One major music company, Sony Corp.’s Sony Music Entertainment, expressed dismay at Amazon’s plans, echoing concerns of others in the industry. “We are disappointed that the locker service that Amazon is proposing is unlicensed by Sony Music,” a spokeswoman said Tuesday evening.

Essentially, music labels want consumers to pay every time the music is accessed in a different manner. New technology, RIAA and others argue, should be monetized to the benefit of content creators.

Amazon and Google offering cloud storage for music that allows the music to be streamed and played on the web, regardless of device or location access reduces music companies revenue opportunities. We know that RIAA is sue happy but Amazon has even made noise that cloud storage may be made available for videos later which would bring in the MPAA. So what is the legality of this cloud storage and streaming thing? Here are my step by step thoughts.

First, let’s start with the question of whether music and videos (and books) can be taken from one form and changed into another form. Take a look at the RIAA website in which even the RIAA agrees that making a digital copy of a CD you own is legal within their interpretation of the law:

It’s okay to copy music onto an analog cassette, but not for commercial purposes.

It’s also okay to copy music onto special Audio CD-R’s, mini-discs, and digital tapes (because royalties have been paid on them) – but, again, not for commercial purposes.

Beyond that, there’s no legal “right” to copy the copyrighted music on a CD onto a CD-R. However, burning a copy of CD onto a CD-R, or transferring a copy onto your computer hard drive or your portable music player, won’t usually raise concerns so long as:

The copy is made from an authorized original CD that you legitimately own

The copy is just for your personal use. It’s not a personal use – in fact, it’s illegal – to give away the copy or lend it to others for copying.

According to the RIAA it is okay to make a transformational copy so long as such a copy is for personal use. (but see RIAA’s comments in 2006 to the DMCA rulemaking wherein they claim this type of activity is not fair use).

The Audio Home Recording Act, companies that manufacture or import a digital audio recording must pay a licensing fee for each device (between $1 and $8 depending on the transfer cost). Neither cloud player allows for recording so I don’t see this act as the basis for imposing licensing fees on Amazon or Google.

Amazon and Google Cloud storage don’t have any sharing components which might implicate them under the METRO-GOLDWYN-MAYER STUDIOS INC. V.GROKSTER, LTD. (04-480) 545 U.S. 913 (2005). Under the Grokster case, the Supreme Court found that, in balance, the Grokster’s limited non infringing uses where outweighed by its infringing uses. Amazon and Google’s cloud player don’t have a sharing component that could lead to . In fact, cloud storage is much more like the Sony case wherein cloud storage principal use is time shifting.

Further, there doesn’t appear any inducement to infringe. In Grokster case, there were several examples given which the Court used to show that Grokster defendants intended for users to infringe:

StreamCast even planned to flaunt the illegal uses of its software; when it launched the OpenNap network, the chief technology officer of the company averred that “[t]he goal is to get in trouble with the law and get sued. It’s the best way to get in the new[s].” Id., at 916.

Amazon, in particular, could argue that it encourages lawful purchases by creating technology that places the legitimate purchases onto the Cloud. (Amazon allows you to make the CloudPlayer the default mechanism for storage instead of downloading after you complete an MP3 purchase).

Another legal case upon which Amazon and Google could rely is the Cablevision DVR suit which was won by Cablevision on appeal to the Second Circuit and the US Supreme Court refused to hear any further appeal. See THE CARTOON NETWORK LP v.CSC HOLDINGS, INC. and CABLEVISION SYSTEMS CORPORATION (PDF).

Cablevision offered cloud based DVR services without a set-top box allowing its customers to use traditional DVR features such as recording a show for later. A number of movie studios and television companies sued Cablevision. The district court ruling authored by Dennis Chin (who also authored the denial of the Google Settlement) initially granted an injunction against Cablevision but the Second Circuit overturned the decision in favor of Cablevision.

Of importance, the Second Circuit’s decision was not based on fair use doctrine as the Sony decision was. Cablevision had waived the fair use defense.

Critically for our analysis here, plaintiffs allegedtheories only of direct infringement, not contributory infringement, and defendants waived any defense based on fair use.

Cablevision argued that the playback copies made by the cloud based storage was direct infringement. The Second Circuit made two important holdings. First, when a “system” makes a copy a customer’s behest, it is obeying the command of the customer, not engaging in any “volitional conduct.”

In determining who actually “makes” a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct.

The second holding is that the transmission of the playback from the cloud did not constitute a public performance. This part of the decision was criticized by the Department of Justice in its brief filed with the Supreme Court when the Supreme Court was considered to grant cert. The Supreme Court asked the Solicitor General to provide its opinion as to whether it should hear the Cablevision case. The DOJ said no, but did find the language of the Second Circuit as to the public transmission troubling:

Such a construction could threaten to undermine copyright protection in circumstances far beyond those presented here, including with respect to VOD services or situations in which a party streams copyrighted material on an individualized basis over the Internet.

(VOD=Video on Demand). The DOJ said that the Second Circuit’s decision was very narrow and should not be read to extend beyond the limited circumstances:

The Second Circuit repeatedly explained that its rejection of petitioners’ public-performance claim depended on a range of factors: not only that each transmission would be sent to a single recipient, but also that (1) each transmission would be made using a unique copy of the relevant program; and (2) each transmission would be made solely to the person who had previously made that unique copy. See, e.g., Pet. App. 30a-31a, 36a, 39a, 41a. By limiting its holding to circumstances in which those two additional features are present, the Second Circuit sustained the legality of respondents’ proposed RS-DVR service without casting doubt on the widespread premise that VOD and similar services involve public performances.

The DOJ’s decision would seem to imply that Amazon and Google’s CloudPlayer may violate the public transmission prohibition. Indeed, DOJ said the following:

The Second Circuit’s decision, however, is unlikely to be the last appellate ruling to address these issues. Other cable providers may initiate services that are similar to respondents’ RS-DVR. Analogous issues also may arise with respect to other network-based services for copying and playing back copyrighted works. [FN3]

FN3 says

One example may be music lockering services, which permit users to upload files to a remote computer server and stream that music to a personal device over the Internet. The general development of cloud computing, which is an umbrella term for services where programs or files are stored remotely and accessed via the Internet or other means, may generate similar issues.

VOD is a bit different from the lockering services as VOD doesn’t require individual ownership per user, but instead transmits to numerous individuals from the same video source. Cablevision’s argument was that each user maintained its own copy that was then retransmitted at the request of the user, kind of a one copy per user argument.

MP3.com was sued vigorously over a similar cloud based streaming service and ultimately settled by paying over $53.4 million. MP3.com allowed streaming if the user could prove that they owned the song. Users did this by inserting the CD into the computer. EMI has sued MP3Tunes, a music lockering service, and that case is still ongoing.

NIMMER & NIMMER, the textbook on copyright, says that

[I]f a transmission is only available to one person, then it clearly fails to qualify as ‘public.’ For it neither directly reaches ‘a substantial number of persons’ nor is it transmitted to a place where such a grouping is congregated. As such it does not implicate the copyright owner’s rights.

David Parkman, former e-Music CEO, says Amazon (and Google)’s cloud service is completely legal because it is a one to one copy to play ratio. I tend to agree with Parkman. I don’t think that the DOJ’s concerns about the Second Circuit’s decision regarding public performance is intended to imply that music lockering by individual users would be unsupported by the DOJ, in part because the cloud service begins with the premise of ownership of a digital copy by the user whereas VOD and DVR services do not.

Why I am talking about this on a blog about books? Because what happens in these cases will affect, to a large degree, our ability to use a cloud based lockering service for digital books that we have all purchased. Suits between the big boys like Sony and EMI against Google and Amazon will provide clarity in the balance of rights between creators of intellectual property and the consumers of it. Remember that Apple bought Lala, a music streaming site, in 2009.

For DRM haters, it might not be a surprise that one legal scholar suggests DRM is the way to prevent cloud based streaming. See Vivian I. Kim, THE PUBLIC PERFORMANCE RIGHT IN THE DIGITAL AGE: CARTOON NETWORK LP V. CSC HOLDINGS, Berkeley Technology Law Journal 24:1 (2009) (PDF). One reason Amazon and Google’s cloud based services work is because almost all music is sold DRM free, thus allowing access without a specific software license.

In sum, there is no definitive legal ruling okaying Amazon, Google and soon, Apple’s, cloud based streaming services; but I think that Amazon et al has thrown down the gauntlet to the music labels. Game on.

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Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She self publishes NA and contemporaries (and publishes with Berkley and Montlake) and spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty.
You can reach Jane by email at jane @ dearauthor dot com

17 Comments

Music labels are concerned because Amazon and Google haven’t worked out a business relationship wherein the music labels and the artists get a piece of the pie every time a song is accessed on the cloud.

I’m confused by this. Isn’t the cloud simply the storage method? The music labels don’t get a piece of the pie every time I listen to a song on my iPod. I assumed I buy a song and then I store my song in an offsite storage site instead of on my hard drive. Whether I listen to it from my Mac, my Touch, the Nano or the cloud, it’s still just a song I paid for the right to listen to as much as I want.

If Amazon unveils an online Kindle app that enables you to read the book you bought from a cloud instead of loading the book and the Kindle app onto your hard drive (maybe for the upcoming Google Chrome netbooks, for example), I wouldn’t expect the reader to give me a nickel every time she opens the book to read.

I must be confused by what the cloud is. I thought it was like a self-storage shed that enabled you to store your stuff without it cluttering up your house.

@Shannon Stacey: Amazon has stated your argument, that the cloud is nothing more than a different type of external harddrive but everytime you upload and then access the stream, a copy is being made. Is that copy made pursuant to fair use or should content creators be paid for this new type of access.

For instance, you can record something on your DVR but can you stream that content on your DVR over the internet? Can you convert that content from your DVR to something that you take with you on your iPad or iTouch or other tablet device or is that new access something you should have to pay for?

The Kim article I linked to is pretty illuminating as far as the argument for DRM. DRM is anti consumer, no question, but from a publisher stand point, I can see how attractive it is. In fact, it is the basis of next week’s column. DRM allows a content creator to control its work, to the extent that digital content can be controlled.

Great column, Jane. These issues seem so far beyond the way our current IP regime conceptualizes ownership. On the one hand, publishers already allow us to have multiple copies by letting us register 6 devices per account, but on the other, they rail against the problem of multiple copies in different formats.

How do DRM’d library copies work? Can you strip the DRM from them the way you can from purchases, and if so, how does the library account for the book? Does it just assume your borrowing is over in 14 days or whatever, without any recapture of the file? When I borrowed books from my library system, the file just “expired” on my device when time was up and I was no longer able to open it. But presumably I could have stripped the DRM and kept it for myself.

I ask because library borrowing seems like the clearest example of how non-DRM’d books can change the relationship. If the library can’t make the book expire and it doesn’t have a system for retrieving the original file without it being copied, then it’s not just borrowing, it’s potentially acquiring/owning.

@sunita Why can’t you have DRM for library usage and no DRM in other cases? I.e., wasn’t the initial offering of DRM free music at a higher price point ($1.29). I don’t think it has to be an either / or sort of thing.

@sunita – I should have said that I think this cloud based access moves us more toward ownership of our digital content rather than leasing because fair use is implicated with the sale and ownership rather than a lease or access.

“Amazon has stated your argument, that the cloud is nothing more than a different type of external harddrive but everytime you upload and then access the stream, a copy is being made.”

That’s true of most storage mediums, whether internal, locally external, or cloud. There’s buffering involved, and in the case of something the size of an MP3 file, in many cases the entire thing will fit inside the device buffer. In the case of a PC, that copy is then moved to system RAM, so you’ve now copied it twice. And if your system is low on memory, some or all of that RAM copy may end up in virtual memory if you pause playback. Even the smallest, least feature rich MP3 and CD and DVD playback devices make a copy of what you’re accessing as part of playback. That’s how we enjoy skip-free music and video.

I’d like to think that our legal system is sensible enough to distinguish between ephemeral copying that’s made in the course of buffering / streaming and an actual copy. As well as appreciate that current electronic licensing for music or video usually allows more than one device (generally 5 or so) to hold a copy of the licensed content, and that a personal cloud storage and streaming service should be considered simply another device.

@Michael – whether buffering is considered to be a copy is actually the subject of serious legal debate and not one that I addressed in the post. Buffering (or fixation) starts with MAI Systems Corp. v. Peak Computer Inc. (9th Cir)

As regards library lending/DRM–at least when it is done through Adobe Digital Editions–the file is downloaded and saved, but the ability to “open” it is locked out after the loan period expires, at which point the license returns to the library to give to someone else. The file remains on your hard drive. If you have a tool to remove Adobe DRM you could use it to remove DRM at any time (i.e. it doesn’t matter whether the license has expired or not). The library has no idea what you do with the file on your hard drive; they just know when they get their license back.

@Jane: Thanks for the reference. After poking through the Wikipedia article on that and some other cases, I see it’s a legal minefield.

Nonetheless, whether the courts recognize common sense consumer rights or not, consumers will ultimately do what they feel they’re entitled to do. People have already been streaming media from home PCs to their other devices, and media companies are unlikely to get a piece of that pie. Rather than trying to sell the same content to the same people over and over again, companies should be focusing on producing new. Sorry, that’s a whole other can of worms. I’ll refrain from getting started on (effectively) infinite copyright terms.

@Jane: That makes total sense. It would, of course, require publishers to be willing to draw a distinction between licensing and ownership. Right now they seem to be trying to slip licensing past us when we think we’re buying the product.
@Joy: Thanks for the clear explanation. That’s how I thought it worked but wanted to be sure.

For instance, you can record something on your DVR but can you stream that content on your DVR over the internet? Can you convert that content from your DVR to something that you take with you on your iPad or iTouch or other tablet device or is that new access something you should have to pay for?

Next I suppose the recording industry shall attempt to charge a license fee every time we put a CD in a CD player. Or, you know, open the jewel case because someone might actually see the shiny silver side and there’s music in there (and you might be copying it with your eyes), so by golly they should get paid for that. Perhaps they should just stop recording music and insist that all their artists only give live performances to naked people (since anyone with clothing might be hiding a secret recording device and clearly every consumer is out to screw them over).

It seems to me that the recording industry (and possibly publishing, once they get up to speed) is working against developing technologies that could actually increase their sales. Yes, some of us old fogies have a collection of CD’s (and in my husband’s case, a vast collection of cassette tapes) that we’ve been playing for years and are willing to spend the hours of our own time copying them to a computer or an MP3 player rather than purchase online (I have some that can’t be purchased online…). But a lot of people don’t think twice spending the extra $ downloading a song they used to own when the whim hits (or, you know, their old music player that was all-the-rage last year becomes totally obsolete and they replace it with a new one).

The recording industry ought to find a way to make owning, purchasing, and listening to its products better, instead of fighting against every new development by an outside company. Lawsuits = bad press = grumpy consumers who are more apt to retaliate by finding a way to get their music without lining greedy corporate pockets.

[…] include some discussion of that case. (You can read more about video streaming and the Cablevision case here) At least one issue seems to be on point and that is whether a copy is created through a […]

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